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The tightening of monetary policies by the US at a time when other countries are easing theirs could make emerging economies "vulnerable" as many of their firms and banks have sharply increased their borrowings in dollars in the past five years, the IMF chief warned on Sunday.
Speaking at the opening of China Development Forum in Beijing, Christine Lagarde (pictured) said the world has yet to achieve full economic recovery as global growth continues to be weighed down by high debt, high unemployment and lacklustre investment.
Referring to IMF's recent forecast to cut global growth to 3.5 per cent and 3.7 per cent in 2015 and 2016 despite the boost from cheaper oil and stronger US growth, she said the global recovery remained fragile because of significant risks.
"This asynchronous monetary policy may trigger excessive volatility in global financial markets. The divergence of monetary policy paths has already led to a significant strengthening of the US dollar," she said.
"Emerging markets could be vulnerable, because many of their banks and companies have sharply increased their borrowing in dollars over the past five years," Lagarde, who was in India last week, said.
